I'm using a Mega R3 with seven, backlit, lcds. Each LCD has three LEDs drawing 20mA. Since this would exceed the limits of the arduino, I am planning on using a separate power supply for the LEDs and the contrast pins (Vo on the lcds.)

The problem I'm concerned about is that each display has a common ground for all of its circuitry, so the display will need to be grounded to arduino and to the other power supply through only one pin.

Is this actually a problem? Is solving it as simple as tying the grounds together?

The current will be consumed by the LEDs, not routed back through ground.

The way to guarantee this is to be sure the - pin ["ground"] of the separate power supply is connectedto the LCD grounds and not to the Arduino board ground.

Also, with this system, you run the risk of creating a big ground loop that produces oscillations and noisein the system. The way to prevent this is to use a Y or octopus arrangement [visualize it], where you have a "single common ground point", and you run a power and ground wire to each of the subsystems separately, including the Arduino board. The worst arrangement would be to daisy-chain the power+ground from one board to the next, and then loop the last one back around to the starting point. Now, you have big ground loop.

I was just saying you connect the LCD power supply +/- directly to the LCDs and the Arduino power supply+/- to the Arduino, and then simply tie a ground wire between the two. As Paul says, then the LCD current does not flow through the ground wire back to the Arduino.

I'm using a Mega R3 with seven, backlit, lcds. Each LCD has three LEDs drawing 20mA. Since this would exceed the limits of the arduino, I am planning on using a separate power supply for the LEDs and the contrast pins (Vo on the lcds.)

The problem I'm concerned about is that each display has a common ground for all of its circuitry, so the display will need to be grounded to arduino and to the other power supply through only one pin.

Is this actually a problem? Is solving it as simple as tying the grounds together?

If the whole thing is running at 5v just power the Mega from the single larger supply.